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Rite Aid (RAD) Expedites Transformation on Restructuring Plan
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Rite Aid Corporation announced a financial restructuring plan, which will help accelerate its ongoing business transformation. This new plan is likely to significantly reduce debt, strengthen financial flexibility and focus on key initiatives. The company has been committed to improving health services for its customers.
RAD has initiated a voluntary court-supervised process under Chapter 11 of the U.S. Bankruptcy Code. As part of this, the company has been asked to finalize the agreement in principle with certain of its senior secured noteholders, accelerate its store footprint optimization plan, implement a proposed transaction wherein MedImpact would acquire Elixir Solutions, access additional liquidity and resolve litigation claims in an equitable manner.
In a bid to improve liquidity and support the company in this process, Rite Aid has received a commitment for $3.45 billion in new financing from particular lenders.
This Zacks Rank #3 (Hold) company is on track to assess its footprint and shut down more underperforming stores, which will further reduce rent expenses and boost its overall financial performance. That said, management is leaving no stone unturned to ensure that customers of the impacted stores have access to health services by transferring prescriptions and associates to other Rite Aid stores or nearby pharmacies.
Moving on, management inked a deal with MedImpact Healthcare Systems, Inc. to divest the Elixir Solutions business. However, Elixir Insurance is neither part of this transaction with MedImpact nor Rite Aid’s Chapter 11 process. Also, Rite Aid has sought for the Court’s help to support its operations, including the payment of wages, salaries and benefits without interruption. It is yet to receive court approval for the same.
In another development, management announced the appointment of Jeffrey S. Stein as chief executive officer, chief restructuring officer and a member of the company’s board of directors, effective immediately.
We believe that the aforementioned steps have been undertaken following reduced transactions in its stores due to drab demand for respiratory-related products, inventory issues and inefficient pricing. This led to a year-over-year revenue decline of 6% in first-quarter fiscal 2024. Also, a reduction in the company’s Prescription Drug Plan membership and the loss of commercial clients at Elixir hurt the top line.
Image Source: Zacks Investment Research
For fiscal 2024, management expects revenues of $22.6-$23.0 billion, down from the $24 billion reported in the prior year, in line with our estimate of $22.6 billion. Consequently, shares of Rite Aid have plunged 56.8% in the past three months compared with the industry’s decline of 4.5%.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in retail and wholesale of general consumer products, currently flaunts a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales implies an improvement of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.
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Rite Aid (RAD) Expedites Transformation on Restructuring Plan
Rite Aid Corporation announced a financial restructuring plan, which will help accelerate its ongoing business transformation. This new plan is likely to significantly reduce debt, strengthen financial flexibility and focus on key initiatives. The company has been committed to improving health services for its customers.
RAD has initiated a voluntary court-supervised process under Chapter 11 of the U.S. Bankruptcy Code. As part of this, the company has been asked to finalize the agreement in principle with certain of its senior secured noteholders, accelerate its store footprint optimization plan, implement a proposed transaction wherein MedImpact would acquire Elixir Solutions, access additional liquidity and resolve litigation claims in an equitable manner.
In a bid to improve liquidity and support the company in this process, Rite Aid has received a commitment for $3.45 billion in new financing from particular lenders.
This Zacks Rank #3 (Hold) company is on track to assess its footprint and shut down more underperforming stores, which will further reduce rent expenses and boost its overall financial performance. That said, management is leaving no stone unturned to ensure that customers of the impacted stores have access to health services by transferring prescriptions and associates to other Rite Aid stores or nearby pharmacies.
Moving on, management inked a deal with MedImpact Healthcare Systems, Inc. to divest the Elixir Solutions business. However, Elixir Insurance is neither part of this transaction with MedImpact nor Rite Aid’s Chapter 11 process.
Also, Rite Aid has sought for the Court’s help to support its operations, including the payment of wages, salaries and benefits without interruption. It is yet to receive court approval for the same.
In another development, management announced the appointment of Jeffrey S. Stein as chief executive officer, chief restructuring officer and a member of the company’s board of directors, effective immediately.
We believe that the aforementioned steps have been undertaken following reduced transactions in its stores due to drab demand for respiratory-related products, inventory issues and inefficient pricing. This led to a year-over-year revenue decline of 6% in first-quarter fiscal 2024. Also, a reduction in the company’s Prescription Drug Plan membership and the loss of commercial clients at Elixir hurt the top line.
Image Source: Zacks Investment Research
For fiscal 2024, management expects revenues of $22.6-$23.0 billion, down from the $24 billion reported in the prior year, in line with our estimate of $22.6 billion. Consequently, shares of Rite Aid have plunged 56.8% in the past three months compared with the industry’s decline of 4.5%.
Other Key Picks
Some other top-ranked stocks are BJ's Restaurants (BJRI - Free Report) , Urban Outfitters (URBN - Free Report) and Walmart (WMT - Free Report) .
BJ's Restaurants, which operates a chain of high-end casual dining restaurants in the United States, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 405.9% growth, respectively, from the year-ago period’s reported levels. It has a trailing four-quarter earnings surprise of 121.2%, on average.
Urban Outfitters, which engages in retail and wholesale of general consumer products, currently flaunts a Zacks Rank #1. The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings suggests growth of 57.1% from the year-ago reported number. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 5.5%.
The Zacks Consensus Estimate for Walmart’s current financial-year sales implies an improvement of 4.2% from the year-ago period’s actual. WMT has a trailing four-quarter earnings surprise of 12%, on average.